Abstract

Sugar and cane prices in India are highly regulated, causing high fluctuations in supply and demand conditions. Present price policy and regulation in the sugar sector in India has resulted in low sugarcane productivity, and stifled profitability and modernization of sugar mills. To unleash the potential of small-scale farming and sugar mills in India, there is a need to eliminate the excessive controls on the sugar sector, which will reduce the costs of production of cane and sugar production. This study suggests a formula that reflects fair and remunerative price for cane that takes into account both costs of production and international price trends. Furthermore, for better price signals in domestic markets, the decontrol of sugar prices should be accompanied by measures to strengthen free trade such as a reduction in the duties for trade, measures to widen participation in futures markets and the elimination of the levy on sugar mills.